CZC is ringing the death knell. The once e-shop of geeks is to lose key functions

The troubles of the Polish Allegro after it acquired the Mall Group including CZC two years ago are apparently far from over. This week, the group of Czech e-shops probably dismissed over a hundred employees, and it itself admits that the set pace of transformation of the long-term loss-making business falls short of its expectations. This entails significant challenges and questions about the long-term direction of some of the largest players in the Czech e-commerce market. And while the general focus is mainly on the Mall, its smaller sister CZC may have a lot more going for it.

They came last week with the information that Allegro plans to ground the CZC e-shop Economic newspaper. Finally, for example, they have functionalities that set CZC apart from the competition and are popular especially for more demanding and professionally oriented customers, such as a configurator of computer sets or community discussions of experts.

The news about the plan to end the aforementioned functionalities was then confirmed for CzechCrunch by independent sources. CZC first externally and then internally developed its own superstructure of the platform on which it operated, which enabled it to operate these functions as well. However, with the transition to a unified platform from Allegro, which is in the process, the continuation of this system is unnecessarily expensive from the point of view of the Polish mother.

Allegro itself reacts ambiguously to these reports. “We are consolidating all our business activities into one common software solution and are investigating what possibilities we can offer CZC customers within Allegra. We thus connect a wide selection of specialized products and a familiar environment for consumers on the CZC side with the efficient Allegra system and all the advantages that the platform offers.” Roy Perticucci, CEO of Allegra, tells CzechCrunch.

However, if functionality is reduced, the e-shop may lose its strong position. “CZC had quite a privileged position among the ajjats in its time – it was a ‘geek’ shop. They greatly appreciated the community around him, which is able and willing to give quick and good advice on everything. For geeks there was CZC, for everyone else Alza,” comments Jiří Hlavenka for CzechCrunch, who, among other things, is an investor in e-commerce and internet companies.

At the same time, Hlavenka co-founded the Vltava.cz e-shop before 2000, then the first ever e-shop in the country, which he sold a few years later. “It’s been a long time ago, we had the Cybex.cz e-shop for computers and we saw Alza as our biggest competitor. I think in the beginning CZC was quite small. In the early years, everyone was fighting with technology and logistics, i.e. with themselves, rather than with their competitors,” he remembers.

From the point of view of an experienced entrepreneur and investor, he evaluates the current events, including those in CZC, although Hlavenka himself admits that he cannot see inside and can only observe what the new owner is doing with the e-shop. “From his point of view, there is only Allegro, which is a Polish super-giant that totally dominates Polish e-commerce. Actually, only Allegro and a lot of little things work there,” comments.

According to Hlavenka, Allegro is convinced – or at least it was – that it will manage to work its way to such a position on the Czech market: “That they will forcefully establish a giant market here, where you can get anything from a flowerpot to a car, that they will dominate the market with it and then only a small fraction will be left. The e-shops he bought from us, i.e. Mall and CZC, are actually just entrance steps, which he quickly ascends to a giant marketplace and then dissolves them in.’

According to Hlavenka, such a scenario would lead to Allegro connecting both markets and acting as a marketplace for other countries, following the example of Amazon. “This would be fine if he succeeded because the resulting value would be enormous. He wouldn’t mind the fact that somewhere along the way Mall and CZC would ‘fall behind the homeland’. But if it doesn’t work out – and so far everything indicates that it won’t – then only the first part of the sentence will come true, i.e. these once famous Czech e-shops, bought at an incredibly high price, will fall to the homeland and nothing will happen.” concludes.

People shop less at Mall Group

So far, CZC has relatively maintained its position, even though it continued to decline in the first year after the acquisition. Allegro no longer comments on specific related data. For example, according to the Similarweb portal, which is used to compare website traffic, 3.3 million people visited CZC during March this year. For comparison: competitor Datart should have recorded 6.2 million visits, Electroworld.cz 1.1 million and Mironet approximately 700 thousand. Alza had 17.1 million visits, Mall 4.5 million.

However, it follows from Allegra’s official report that the Mall Group, which also includes CZC and other e-shops in five countries, saw a significant decrease in the volume of goods sold (GMV), by 22.5 percent year-on-year for 2023. Sales alone fell by 22.4 percent. The number of active shoppers also fell by four percent last year, and each customer spent 19.4 percent less on average at these e-shops. In addition to the outflow, this shows that those who shop are getting cheaper goods, but this may also be due in part to a general decline in online spending.

At the same time, according to official statements, CZC’s closest competitors do not observe major changes in their customers. Commercial marketing director František Mikoška from HP Tronic, which includes Datart, said that it is difficult for them to evaluate the changes in the number of customers since last summer, when the Allegro.cz marketplace officially started operating on the Czech market.

“We have seen some change in the number of new shoppers, but we would not allow that this effect would be significant, and to interpret it as the effect of Allegro’s entry,” comments Mikoška. “We perceive that the activity of competitors such as CZC and Mall is decreasing, but these brands are still working. We see very interesting growth in the data in some categories, but the reason may be differentthan a reduction in the activity of certain competitors. The growth may be due, for example, to price reductions by some manufacturers.”

Another TSBohemia player sees it similarly. “We are currently not growing much in the end customer segment. Significantly higher demand, by about twenty percent, but we are seeing corporate customers. Whether this is due to their departure from the Mall and CZC e-shops is difficult to assess, since at the same time we launched several of our own activities in this area.” comments director Patrik Hužva.

Alza as the winner

And how is the number one in the market? “We have made many changes and innovations that are very popular with our customers, which contributes to the positive perception of our brand and is reflected in the growth of traffic.” Alza board member Petr Bena comments and lists the services as You order by midnight, you have it in AlzaBox in the morningfree delivery with AlzaPlus+, complaints via AlzaBoxy or a two-year warranty for companies.

“We can see from the data that the majority of customers who have ever shopped at Malla or CZC also shop at Alza, so they are also our customers. However, we cannot determine exactly whether they switched partially or completely from CZC or Mall. It is interesting, however, that the reverse is not the case, most of Alza’s customers do not shop at these two e-shops.” adds Ben.

In recent years, Alza has stopped actively communicating its results, it publishes its financial results in its official financial statements in January, but with a one-year delay – this January it showed the figures for 2022. For the first time in twenty years, its turnover then fell by approximately 3.5 billion crowns.

According to CzechCrunche sources, however, the number one in the local market now has a reason to smile. Last year, it was supposed to grow again and surpass its historical year of 2021. This would mean that its sales could grow by ten percent last year, while the entire e-commerce market fell by six percent year-on-year.

After all, in the middle of last year and just weeks after Allegra officially entered the Czech market, Alza announced that it was changing its original Marketplace to Alza Trade, with which it significantly differentiates itself from other players with classic online marketplaces. “Unlike marketplaces, goods on Alza Trade are not sold to the customer by individual sellers, but directly by the Alza company. Customers thus conclude a contract with Alza. She is responsible for the complete sales and after-sales process and is responsible for the delivery of goods and the provision of all services. In relation to Alza, individual sellers are then in the position of suppliers.” commented the company during the presentation.

This is exactly what the Czech customer can hear, because he will expect such guarantees especially for more expensive items such as white goods or larger electronics, which are segments in which Mall and CZC were very prominent players.

What are the goals of Allegra

From a long-term perspective, Allegro plans to strengthen its international position, which is also the reason why it acquired the Mall Group two years ago. It plans to gradually launch its marketplace in other countries – last year it was the Czech Republic, and a few weeks ago Slovakia. In addition to our region, he also sees long-term potential in western Europe, where Amazon is dominant, but it generally does not have a good reputation among the merchants themselves, which could play into Allegro’s cards.

It is not clear how the Mall and CZC will fit into the whole concept, but in the future, according to the official statement, Allegro continues to count on CZC. “Na Allegra is one of the leading dealers in its category and we are aware of its loyal and knowledgeable customer base. We are therefore ready to fully support the company in its transformation,” describes CEO Perticucci.

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According to him, many customers who previously shopped at Malla and CZC are now shopping at Allegra. “But the feedback we get from them is largely positive, especially in terms of the overall shopping experience at Allegra – primarily in terms of prices and range, they simply have more choice,” adds that in the near future the company wants to strengthen the so-called omnichannel proposition that CZC should have.

“At the same time, CZC is a key merchant on the Allegro platform, so it is a joint success leading to the same goal – to make available to customers the widest possible range of goods at attractive prices and thus meet their needs in online shopping. We would like to support CZC in acquiring more foreign customers, which will also be helped by the store-in-store concept,” adds Perticucci.